23rd Jul 2012, by Agrimoney
Soybean prices will "likely" set a fresh record to contain Chinese soybean imports, which data showed soaring in June, Macquarie said on Monday, even as futures tumbled.
The double whammy of drought damage to US Midwest crops, following disappointing South American harvest at the start of the year, has "set up an explosive situation" for soybean prices, the bank said.
Soybean prices, which touched records above $17.70 a bushel last week, "will likely have to rise further" to constrain demand.
This includes orders from China, the world's largest buyer, which customs data on Monday showed importing 5.6m tonnes of the oilseed last month, the highest figure for eight months, and a rise of 31% on the figure for June last year.
'Curtail Chinese imports'
"Any production loss that we see in the US will require prices to rise to even higher levels now in order to curtail Chinese import demand," Macquarie said.
"Prices will have to trade in the high teens [dollars per bushel] for the rest of the year for this to occur."
The bank added: "If yields fall to below 40 bushels per acre, we will have to ration a significant volume of Chinese imports through the 2012-13 season."
In fact, many analysts have already cut their forecasts for the US soybean yield below this level, with Goldman Sachs on Monday downgrading its estimate to 39.5 bushels per acre.
The US Department of Agriculture estimate is at 40.5 bushels per acre.
However, soybeans, and other agriculture commodities, suffered losses on Monday, fuelled by fears for eurozone debt, and forecasts for much-needed rain in the Midwest.
Smaller domestic harvest
Any reduction in Chinese imports would come against a backdrop of domestic production hopes weakened by a switch by growers from the oilseed to corn, which offers better returns.
Indeed, Barclays Capital said that a third successive year of smaller soybean sowings in 2012, "as farmers increase domestic corn production, bodes well for higher 2012-13 soybean imports".
Chinese corn imports were elevated too in June, reaching a five-month high of 528,600 tonnes, quadruple those of May.
However, imports of wheat, which has been favoured as a feed grain thanks to high corn prices, fell to a five-month low of 216,700 tonnes, down 61% month on month, although as BarCap noted, "the decline came from record high wheat imports in May".
Sweet tooth
China's cotton imports, net of 5,900 in exports, also fell to a five-month low, of 470,100 tonnes, after the country wound down its programme of rebuilding state stockpiles.
Cocoa and coffee buy-ins also fell.
However, sugar imports more than trebled, year on year, to 380,100 tonnes, the highest of 2012 so far.
Soybean prices will "likely" set a fresh record to contain Chinese soybean imports, which data showed soaring in June, Macquarie said on Monday, even as futures tumbled.
The double whammy of drought damage to US Midwest crops, following disappointing South American harvest at the start of the year, has "set up an explosive situation" for soybean prices, the bank said.
Soybean prices, which touched records above $17.70 a bushel last week, "will likely have to rise further" to constrain demand.
This includes orders from China, the world's largest buyer, which customs data on Monday showed importing 5.6m tonnes of the oilseed last month, the highest figure for eight months, and a rise of 31% on the figure for June last year.
'Curtail Chinese imports'
"Any production loss that we see in the US will require prices to rise to even higher levels now in order to curtail Chinese import demand," Macquarie said.
"Prices will have to trade in the high teens [dollars per bushel] for the rest of the year for this to occur."
The bank added: "If yields fall to below 40 bushels per acre, we will have to ration a significant volume of Chinese imports through the 2012-13 season."
In fact, many analysts have already cut their forecasts for the US soybean yield below this level, with Goldman Sachs on Monday downgrading its estimate to 39.5 bushels per acre.
The US Department of Agriculture estimate is at 40.5 bushels per acre.
However, soybeans, and other agriculture commodities, suffered losses on Monday, fuelled by fears for eurozone debt, and forecasts for much-needed rain in the Midwest.
Smaller domestic harvest
Any reduction in Chinese imports would come against a backdrop of domestic production hopes weakened by a switch by growers from the oilseed to corn, which offers better returns.
Indeed, Barclays Capital said that a third successive year of smaller soybean sowings in 2012, "as farmers increase domestic corn production, bodes well for higher 2012-13 soybean imports".
Chinese corn imports were elevated too in June, reaching a five-month high of 528,600 tonnes, quadruple those of May.
However, imports of wheat, which has been favoured as a feed grain thanks to high corn prices, fell to a five-month low of 216,700 tonnes, down 61% month on month, although as BarCap noted, "the decline came from record high wheat imports in May".
Sweet tooth
China's cotton imports, net of 5,900 in exports, also fell to a five-month low, of 470,100 tonnes, after the country wound down its programme of rebuilding state stockpiles.
Cocoa and coffee buy-ins also fell.
However, sugar imports more than trebled, year on year, to 380,100 tonnes, the highest of 2012 so far.
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